Should Obama Have Set Cost Limits On Health Care Reform?

By Megan McArdle

Ezra Klein considers the $900 billion price tag Obama put on health care reform, and calls it "the $900 billion mistake". It is not enough, he says, to put together a good bill, and as a limit, it seems pretty arbitrary:

But once that number entered the process, it began guiding the process. Sources on the Hill aren't really clear how the sum transformed from an estimate of the president's plan to a hard limit for their plan. Few recall that the original language included the qualifier "around." Even so, the number stuck. It strengthened the hand of moderates in both chambers and allowed them to create a ceiling. It also seemed clear that if the White House was comfortable with $900 billion, then it wasn't going to fight to protect the spending in any bill that exceeded that cap, so there was no point in the liberals bothering to push the issue.

The problem is that the number, which was chosen at a point of political weakness for health-care reform and the Obama administration, is too low. Most experts think you need closer to $1.1 trillion for a truly affordable plan. Limiting yourself to $900 billion ensures that the subsidies won't be quite where you need them to be, and means that virtually every spare dollar has to be spent strengthening them. If you want to add $30 billion to the bill creating coordinated care teams across the country -- a project that could transform chronic care in this country and eventually save many times its start-up cost -- there's little budgetary flexibility even if you could find the revenue, because each dollar is in a zero-sum competition with each other dollar so the entire plan comes in under the limit.

One hates to be a concern troll, and far be it from me to tell progressives how to run their programs. But it seems to me quite obvious how the number got picked and why it became a hard limit: it would be very difficult to sell a bill that's any bigger. A health care bill much bigger could be plausibly rounded up to a trillion dollars by the opposition, and though the American public is still somewhat blinded by sticker shock from the last eight years of deficits, $1 trillion still sounds like a lot of money. It also sounds like the highly unpopular bailouts.

Maybe Democrats could have passed a bill that cost $1.1 trillion, or more--cobbling together coalitions by spending freely on goodies is a time honored tradition. The problem is, the Democrats already spent a trillion dollars on goodies. That adds constraints from both voters and the bond markets. So I think a $1.1 trillion dollar bill, while making it easier in some ways to build a coalition, would have risked a voter backlash that would have rendered passage impossible. Health care can't lose too many percentage points off its approval rating before it becomes too radioactive to pass no matter how many wonks, lobbies, or narrow demographic segments like it.